Canada stops digital tax on technology giants in the midst of American commercial negotiation pressure
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The Canadian government has canceled a digital service tax that was to take effect on Monday after President Donald Trump threatened to break up trade negotiations between the United States and Canada for tax.
The Government of Canada adopted its tax on digital services of 3% a year ago and the collections were to start on Monday. The tax applied to large technological companies that have produced more than $ 20 million a year of online market services, online advertising, social media services and some user data sales involving commitment with users in Canada.
The digital services tax would apply, that the company be based in Canada, and would also have applied retroactively to 2022, which puts a tax burden of around $ 2 billion on large American technological companies that do business in Canada.
The Digital Services Tax of Canada caused both repression of the Trump administration and the Biden administration, which was in office during its initial creation and said that the proposed tax was incompatible with an existing trade agreement. Technological companies like Amazon, Meta, Google and Apple have opposed the tax.
Canada to resume business discussions with us after canceling the digital services tax
President Donald Trump threatened to break up trade negotiations with Canada on the tax. (Katopodis Tasos / Getty Images / Getty Images)
Trump said on Friday that it would stop commercial talks between the United States and Canada, slamming the neighbor in northern America as “a very difficult country with whom to exchange” in an article on Truth Social, adding that it would inform Canada of its rate rate in the next seven days.
The Canadian government announced on Sunday that it would cancel the digital services tax, interrupting tax recovery that should start on Monday while the legislation to officially cancel the measure is prepared by the Parliament. He added that he would prefer to reach an agreement with other countries on digital services taxes.
Canada responds after Trump stopped business discussions on digital services
President Donald Trump and Canadian Prime Minister Mark Carney will resume commercial negotiations after the decrease in digital services tax. (Reuters / Kevin Lamarque / Reuters)
“The DST was announced in 2020 to respond to the fact that many major technological companies operating in Canada cannot pay a tax on revenues generated by Canadians,” the Canada Ministry of Finance said in a statement. “Canada’s preference has always been a multilateral agreement linked to the taxation of digital services.”
“In our negotiations on a new economic and security agreement between Canada and the United States, the new Government of Canada will always be guided by the overall contribution of any possible agreement to the best of Canadian workers and businesses,” added Prime Minister Mark Carney.
The former governor of the Bank of Canada, Mark Carney, became the Canadian Prime Minister after winning the Liberal management race in March 2025. (Artur Widak / Nurphoto via Getty Images / Getty Images)
The United States is the largest trading partner in Canada, while Canada is the largest importer in American exports and one of the three main sources of American imports.
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American and Canadian governments had previously accepted a deadline for July 21 for commercial negotiations. The American-mexico-Canada (USMCA) agreement is expected to be renegotiated by next year.
Reuters contributed to this report.
